South Asian Free Trade Area (SAFTA) & ASEAN

Jagran Josh

01-DEC-2015 13:03

The most significant aspect of the12th SAARC Summit (Jan. 4-6, 2004) at Islamabad, the Capital City of Pakistan, was the signing of a historic Agreement on Free Trade. The leaders of India, Pakistan, Bangladesh, Bhutan, Maldives, Nepal and Sri Lanka have agreed upon to create a 'South Asian Free Trade Area' (SAFTA).

SAFTA came into force since January 1, 2006 replacing South Asian Preferential Trade Agreement (SAPTA) which was operative among SAARC countries, since December 7, 1995. SAPTA was the success of 8th SAARC conference held in New Delhi in 1995 where this new concessional trade system of SAPTA was approved. SAPTA was the factor which really opened all positive possibilities to establish SAFTA. SAFTA presupposes abolition of all kinds of trade and tariff restrictions. Ultimately it will pave the way for the creation of common market with common currency. Seven SAARC member countries agreed upon to reduce tariffs between 0-5percent by 2016. The SAFTA agreement allows any states to pull out of the treaty at any time.

Intra-SAARC Trade Flows under SAFTA

The exports under SAFTA have been witnessing considerable upward trend since the launching of the Trade Liberalisation Programme (TLP). As of 20 September 2013, the total f.o.b. value of exports by Member States under SAFTA has reached about US$ 3 billion since launching of SAFTA Trade Liberalisation Programme (i.e. July 2006). Still intra-SAARC trade flows under SAFTA are far below the potential. For smooth functioning of the SAFTA, customs notifications for implementing Trade Liberalisation Programme (TLP) are issued as per the agreed timeline by the Member States. While reduction in the size of Sensitive Lists is important to increase the quantum of regional trade, efforts are being made to take out those products out of the Sensitive Lists that are of export interests to the SAARC Member States for trade within South Asia.

Association of South- East Asian Nations (ASEAN)

ASEAN is a union of South-East Asian Nations. Indonesia, Philippines, Malaysia, Singapore and Thailand constituted this association on August 8, 1967. Brunei also joined this ASEAN in 1984. In July 1995, Vietnam was also given its member- ship. Laos and Myanmar got its membership in 1997. On April 30, 1999, Cambodia also became the member of ASEAN. At present, 10 countries are the member of ASEAN-Indonesia, Philippines, Malaysia, Thailand, Singapore, Brunei, Vietnam, Laos, Cambodia and Myanmar. The object of ASEAN is to promote economic co-operation in South-East Asia and also to ensure economic stability in the region. Its headquarter is in Jakarta but a Secretary of ASEAN lives in the capital of each member country. The post of General Secretary of ASEAN is rotated among each member country alphabetically, after every two years.

On July 23, 1996, ASEAN gave advisory status to India. Besides India, China and Russia also got this status. USA got this status earlier. India cannot join the ASEAN as a member due to its geographic allocation. India is a part of South-Asia while ASEAN is an organisation of South-East Asian Nations. The leaders of the 10 member Association of South East Asian Nations (ASEAN) met in Singpore.

ASEAN to Create 'Free Trade Area-FTA' by 2015

Association of South East Asian Nations (ASEAN) has initiated steps to integrate the economies of member states to make the region more attractive for investors to face competition from the economies like China and India. ASEAN, a group of Indonesia, Thailand, Malaysia, Singapore, Philippines, Brunei, Vietnam, Myanmar, Cambodia and Laos has finally decided to sign the blueprint for the proposed ASEAN Economic Community that will take effect in 2015. The blueprint will set out specific goals and targets to transform ASEAN into a single market of over 550 million people with free movement of goods, services, investment and talented manpower.

ASEAN has drawn several plans to foster economic growth. These include creation of a single market by 2015, an open skies pact and initiation of several FTAs with countries in the region. In a step to promote a single market in the region, ASEAN has decided to implement an Open Skies Agreement by December 2008 whereby airlines of member states can fly to each other's capital cities. Liberalisation will be extended further by 2015 to let the region’s airlines fly to any destination within ASEAN.